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The abandonment of the Vasilikos terminal project by a Chinese consortium has triggered a cascade of financial and operational challenges for Cyprus, with substantial implications for state finances and energy infrastructure.
According to a report by Kathimerini's Apostolos Tomaras, the project, crucial for Cyprus's energy strategy, has encountered severe complications following the Chinese contractor's withdrawal and the European Public Prosecutor's Office intervention. The immediate concern is the potential financial burden on the Cypriot government, which could face double-payment issues for incomplete works. The European Commission is demanding reimbursement of €68.6 million from the €101 million allocated for the terminal, creating a significant financial gap if the explanations provided by Nicosia are deemed insufficient by the September 8 deadline.
The EU had designated €101 million to support the terminal as a Project of Common Interest. Should the European Commission reject Cyprus's claims, the government may have to repay this amount while also covering an additional €32.4 million in construction costs. The situation is further complicated by concerns over potential repercussions on other EU-funded projects if irregularities are discovered.
The immediate concern is the potential financial burden on the Cypriot government, which could face double-payment issues for incomplete works.
Another pressing issue is the "PROMETHETEAS" vessel, a floating LNG import unit currently stranded at a Chinese facility in Shanghai. Following an agreement in June 2022, Cyprus paid an additional €25 million to the contractor, transferring ownership of the vessel. However, the vessel remains out of reach, prompting Cyprus to seek a new FSRU through public tender. Experts estimate that leasing a replacement could cost up to $100 million annually, adding a significant financial burden.
The completion of onshore infrastructure at Vasilikos, which includes a jetty, pipelines, and storage facilities, is also behind schedule. With 60% of the work completed, an estimated €70 million will be required to finish the project by the end of the year, likely sourced from national funds.
The delay in the terminal's operation exacerbates the financial strain due to ongoing expenses for polluting fuels, amounting to €268 million annually. Energy experts project that using fuel oil instead of cleaner alternatives could result in an annual financial burden of up to €300 million.
The Cypriot government acknowledges the financial pressures but remains optimistic about completing the project. Officials are exploring ways to cover the costs, potentially through increased consumer fees once the terminal is operational. Meanwhile, they are pursuing compensation from the Chinese contractor for the financial losses incurred.
As Cyprus navigates these complex challenges, the immediate focus remains on addressing the financial shortfalls and ensuring the project's completion amid growing concerns about energy security and fiscal stability.
